You will see and hear many terms while investigating whether to file bankruptcy. You will also see and hear these terms repeatedly if you choose to file for bankruptcy. You will hear them from your attorney, see them in the documents you file, and hear them from both the court and from creditors. A simple explanation of many of these terms will help you avoid confusion.
Basic Bankruptcy Terms
341 Meeting—A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.
Automatic Stay—An injunction that automatically stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed.
Bankruptcy Estate—All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.
Chapter 7, Chapter 11, Chapter 13 – These are chapters in the bankruptcy proceedings. When people use these terms they are referring types of bankruptcy filings and proceedings. Chapter 7 allows for liquidation of assets and wiping out certain debt. Chapter 11 allows for reorganization, usually by a corporation or partnership, in order to facilitate repayment of debt. Chapter 13 allows for adjustment of the debts of a person with a steady income.
Creditor – The person or entity to whom the debt is owed.
Debtor – The person or organization owing a debt.
Discharge – The extinguishing of debt owed. Not all debt may be discharged. The most common non-dischargeable debts are taxes, student loans, and child support.
Exempt Assets—Property that a debtor is allowed to retain, free from the claims of creditors who do not have liens on the property.
Liquidation—A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
Nondischargeable Debt—A debt that cannot be eliminated in bankruptcy.
Nonexempt Assets—Property of a debtor that can be liquidated to satisfy claims of creditors.
Petition—The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter under which the case is filed, and estimated amount of assets and liabilities.
Trustee – A bankruptcy trustee is appointed in a bankruptcy case. The trustee represents the bankruptcy estate and the interests of the creditors. This person will review the debtor’s bankruptcy filings. This person is supervised by the court.
